China’s ‘different’ systems an oil firm concern: Canada PM

Canadian Prime Minister Stephen Harper said on Friday that China’s “very different” political and economic systems are a concern as his government decides whether to approve CNOOC Ltd’s US$15.1 billion bid for oil producer Nexen Inc.

The comments were some of the most revealing Harper has made in connection with the landmark CNOOC deal, which has raised fears over Chinese state-owned enterprises buying up Canadian energy assets.

Some members of Canada’s governing Conservative Party are wary of the CNOOC bid, in part because of what they say are unfair Chinese business practices.

Harper, speaking to reporters in Dakar, Senegal, said Canada wants a growing relationship with China, but added that Chinese investments must be scrutinized from a national security perspective.

This week Ottawa hinted strongly that it would exclude Chinese telecommunication equipment giant Huawei Technologies Co Ltd from participating in the construction of a secure Canadian government communications network because of security risks.

Harper, asked about Huawei and the CNOOC takeover, began his answer by saying he would not comment on any particular transaction, but in his subsequent remarks he clearly touched upon both cases.

“The relationship with China is important. At the same time it’s complex. It’s complex because the Chinese obviously have very different systems than we do, economic and political systems, and that’s why obviously some of these particular transactions raise concerns,” he told reporters in Senegal.

The Conservatives need to balance concerns over security and an increased Chinese presence in Canada with their push to attract more foreign investment for the Canadian resource sector.

Ottawa says the oil and gas industry needs C$650 billion (US$663 billion) to fund new projects over the next decade alone and concedes that much of the money will have to come from abroad.

The Canadian government this week extended its review of CNOOC’s bid for Nexen by 30 days, to Nov. 11. Earlier it had invoked a national security exemption that would allow it to block Huawei from participation in its new telecoms network. The extension, while expected, comes amid a growing furore over alleged Chinese espionage in North America. Some Canadians also fear that a successful CNOOC bid for Nexen could spark a wave of mega takeovers of Canadian energy producers by foreign enterprises.

“We will ensure as a government that we have not only a growing relationship with China, but a relationship with China that is in Canada’s best interests,” Harper said.

“And of course ... there’s a national security dimension to this relationship, in fact to all our activities, that we take very seriously,” he added.

Ottawa says that at about the same time it announces a verdict on the CNOOC bid, it is also to unveil clearer guidelines indicating the kind of foreign investment Canada wants.

The oil sands of the Western Canadian province of Alberta are the world’s third-largest oil deposit and Nexen’s portfolio includes operations in the oil sands as well as shale assets in the province of British Columbia and projects in other parts of the world. If approved, the CNOOC bid would be the biggest Chinese takeover of a foreign company. The deal is being reviewed under the Investment Canada Act, which allows the government to examine whether a transaction is of “net benefit” to the country.